Chapter 9 Bankruptcy - Definition
If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.
- Accounting, Taxation, and Reporting
Law, Transactions, & Risk Management
Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
- Marketing, Advertising, Sales & PR
- Business Management & Operations
- Economics, Finance, & Analytics
- Professionalism & Career Development
What is Chapter 9 Bankruptcy?
Chapter 9 of the US Bankruptcy Code is applicable to US municipalities, including towns, counties, cities, tax districts, municipal utilities, and school districts. This chapter allows a type of reorganization that allows distressed municipalities to pay back their debt while under bankruptcy protection.
A Little More on What is Chapter 9 Bankruptcy
The provision of Chapter 9 is quite different from other chapters of the bankruptcy code. This chapter prohibits the liquidation of assets belonging to municipalities. Municipalities are under the jurisdiction of the United States, hence, it is impossible to liquidate their assets in order to pay back the creditors.
Only municipalities are eligible to file for a Chapter 9 bankruptcy, the municipality must, however, meet the four requirements below;
- The municipality must be insolvent.
- The municipality must be authorized to file for Chapter 9 under the law of the state.
- The municipality must be willing to reorganize its debts.
- It must provide evidence of negotiation of good faith or an agreement with the creditors. If it is impossible to negotiate or obtain an agreement with creditors, it should also be stated.